Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
EMMA ALBERICI: Mathias Cormann thanks for joining us again.
MATHIAS CORMANN: Good evening Emma.
EMMA ALBERICI: When did Budget repair, getting back to surplus, stop being your top priority?
MATHIAS CORMANN: The Budget is our plan for jobs and growth and it is also our plan to live within our means. If you look at the Budget bottom line, it is improving year on year, both in dollar terms and as a share of the economy. The return to surplus is actually estimated to happen at the same time as in previous estimates.
EMMA ALBERICI: But yet, over the next four years, your policy decisions, laid out in this Budget improve the deficit by just $1.7 billion.
MATHIAS CORMANN: We have demonstrated fiscal discipline in this Budget. The $1.7 billion is the net improvement to the Budget bottom line as a result of policy decisions. That is actually on the spending side of the Budget, we have improved the Budget bottom line by about $3 billion. What that shows is that wherever we have been required to spend more on things like education and hospitals we have been able to... interrupted
EMMA ALBERICI: Sorry to interrupt you, but in terms of your policy decisions, the net effect over four years, detailed in your own papers is $1.7 billion. That’s revenue minus expenses.
MATHIAS CORMANN: What I was about to explain to you is that we have continued to control expenditure. Wherever there has been a requirement for increased spending, we have more than paid for that in spending reductions in other parts of the Budget. That means that we have actually reduced expenditure as a result of policy decisions by $3 billion. Spending as a share of the economy is projected to fall, from 25.8 per cent this year to 25.2 per cent at the end of the forward estimates.
EMMA ALBERICI: Still at a record high.
MATHIAS CORMANN: It is actually not at a record high and it is reducing over the forward estimates. When we came into Government, we inherited an increasing trajectory when it came to spending as a share of the economy. The National Commission of Audit identified that spending would increase to 26.5 per cent by 23-24. We have stopped that increase and we are bringing it down to 25.2 per cent. If you look at our Budget repair effort, we have been able to achieve it without increasing the overall tax burden in the economy because that would be bad for growth and jobs, and that is exactly what Labor would want to do. They would want to tax more to spend more and to borrow more. We want to tax better. We are not increasing the overall tax burden in the economy. When we are controlling expenditure, we are bringing expenditure down as a share of the economy and we are paying for all of our increased spending by spending reductions in other parts of the Budget. In fact by higher spending reductions in other parts of the Budget.
EMMA ALBERICI: Let’s talk about debt. In his last budget, Wayne Swan forecast debt to peak at 11.4 per cent of GDP, you called that a ‘debt and deficit disaster’. What are the public then to make of the fact that you're now saying that by 2017-18 the Government’s net debt position will amount to 19.2 per cent of GDP or $347billion?
MATHIAS CORMANN: Government net debt is lower than it would have been if we had not changed Labor’s policy settings... interrupted
EMMA ALBERICI: Let’s stick to the question. We are talking about 11.4 per cent versus 19.2 per cent.
MATHIAS CORMANN: I am sticking to the question but you always seem to want to ignore that what we inherited wasn’t just a point in time, but a forward trajectory. We inherited a deteriorating Budget trajectory from Labor. We inherited unsustainable and unfunded spending growth, locked into legislation and also locked into the years beyond the published forward estimates at the time of the last election. Spending on Gonski, spending on hospitals, spending on the NDIS, not funded and the spending growth trajectory completely unaffordable and not funded. Now we have worked very hard…interrupted
EMMA ALBERICI: And when these things aren’t funded, they are paid for out of debt.
MATHIAS CORMANN: And indeed, the point is…interrupted
EMMA ALBERICI: And the fact is that Government debt under yours and Scott Morrison’s financial leadership is now on track to be higher than the debt John Howard inherited from Paul Keating in 1996.
MATHIAS CORMANN: The spending growth trajectory is now lower than what it was when we came into Government and as such the debt levels are lower than they would have been, if Labor had stayed in Government and not changed their policies.
EMMA ALBERICI: They’re very high, you admit?
MATHIAS CORMANN: They are higher than they were when we came into Government, they are lower than they would have been if we had not made the changes we have made. That is because we are keeping spending under control, we have reduced the spending growth trajectory. Labor is trying to have it both ways. They are trying to say that we are spending too much and that we are cutting too much. That is just wrong…interrupted
EMMA ALBERICI: I’m not talking about what Labor is saying…interrupted
MATHIAS CORMANN: That is your argument.
EMMA ALBERICI: I am making objective observations.
MATHIAS CORMANN: That is essentially the argument you are making. You are trying to... interrupted
EMMA ALBERICI: I’m just looking at the bald facts.
MATHIAS CORMANN: No you’re not. You are trying to ignore the spending growth that Labor locked into legislation... interrupted
EMMA ALBERICI: No, I’m not talking about Labor. With respect, Senator, I am looking at your own figures and I am ignoring Labor’s figures because under analysis tonight is your Budget. Now let’s look at some specifics, you individually get a tax cut, but people with a taxable income of less than $87,000 which is most people in the economy, they get no extra cash in their pockets over the next four years.
MATHIAS CORMANN: There are a number of measures in particular in the superannuation space that are very much…interrupted
EMMA ALBERICI: But I specifically said no money back in their pocket.
MATHIAS CORMANN: This Budget is not a giveaway Budget. This Budget is very much designed to be a plan for jobs and growth. It is designed to ensure for example, a more competitive company tax rate, which helps us attract more investment, it helps us increase productivity, it helps us increase the number of jobs, it helps us over time, increase real wages and living standards. That is what is going to be the engine and the driver for lower and middle income earners across Australia to get ahead. Now people on low incomes, people on incomes below $80,000 did receive income tax cuts linked to a carbon tax which we have abolished. By abolishing the carbon tax, we turned those compensatory income tax cuts into genuine income tax cuts. What we’ve done in this Budget is to ensure that average earners, full time average earners across Australia don’t end up getting into the second highest tax bracket and that is…interrupted
EMMA ALBERICI: That’s not the average earners, that’s high income earners.
MATHIAS CORMANN: Are you saying that somebody on $80,000 is a high income earner?
EMMA ALBERICI: I’m saying that’s not the average wage. The average wage is $45,000-$60,000.
MATHIAS CORMANN: The full time average wage is just below…interrupted
EMMA ALBERICI: Most people don’t work like that.
MATHIAS CORMANN: The full time average wage is just below $80,000 and what we are making sure, is that over the next three years, your full time average weekly earner is not going to move into the second highest tax bracket.
EMMA ALBERICI: You talked about tax cuts being good for jobs. In recent years, most of the jobs growth has come from big business, so why are you giving small business such a significant tax cut and making big business wait until 2018?
MATHIAS CORMANN: That is actually completely false.
EMMA ALBERICI: According to the ABS, small businesses, that is employing less than 20 people, were responsible for generating just 18 per cent of the overall jobs growth over the five years to 2014. But most of the jobs growth, 52 per cent came from big businesses.
MATHIAS CORMANN: Small and medium sized businesses employ about 70 per cent of all employees across Australia and in recent years have been responsible for most of the employment growth across Australia. Small and medium sized businesses have been responsible for most of the employment growth across Australia. We make absolutely no apology for prioritising small and medium sized businesses with our enterprise tax cuts. Over the next decade our enterprise, our ten year enterprise tax plan will bring down the corporate tax rate to 25 per cent across the board, which will help us attract increased investment, which will help us drive stronger growth, create more jobs and increase real wages.
EMMA ALBERICI: We’re out of time Mathias Cormann, thank you.
MATHIAS CORMANN: Always good to talk to you.